Gall’s Law & Bitcoin

Every passage, on the record.

1. 01:12Reference

   John Gall was a complex systems theorist who made a discovery and it came out in a book in 1975.

2. 01:12Reference

   It came out in a book in 1975, Systematics, I think it is systemics, whatever it is, it went something like this: all complex systems that work evolved from simpler systems that worked.

3. 01:12Quote

   All complex systems that work evolved from simpler systems that worked.

4. 01:12Claim

   All complex systems that work evolved from simpler systems that worked. Complex systems are full of variables and interdependencies that must be arranged just right in order to function, and a complex system designed from scratch will never work in the real world, because it hasn't been subject to environmental selection forces while being designed, and uncertainty ensures you can never anticipate all of those interdependencies and variables in advance.

5. 02:09Claim · condensed

   The way you apply Gall's Law is you create a very basic system and then check its fitness in the actual environment you'll be operating in. You start by asking what problem this system is solving, what it's solving for, who is going to value it, and where the utility comes from.

6. 02:49Analogy

   This sounds an awful lot like evolution, except the selection is being interpreted by life as we're iterating via tech rather than through biological life cycles.

7. 03:41Idea

   What is the universe made up of? It's made up of energy. How do we order energy? We gather it together in like form and then we condense it down, we make it denser and denser, and the more dense that energy becomes the more ordered it becomes. Order is created through organizing energy reserves in an ever increasing density.

8. 03:41Claim · condensed

   The purpose of life is to order the universe, and order is created through organizing energy reserves in an ever increasing density. If that's the end goal, humans are the clients running the life software: they're taking all the code life has built up from its simplest beginnings and carrying it forward, modifying it at the margins.

9. 03:41Analogy · condensed

   Think of it like building a piece of software: first you define the purpose of the system, then you ask who the client is. The client of life is the universe, but humans are the clients in practice, because they're the tip of the chain running life's code and modifying it as they go.

10. 05:03Claim · condensed

    Picture the most basic system as a single cell: there's an outer wall which protects the order contained inside, and it transforms energy inside the wall by harnessing energy that exists outside the wall. Somewhere along the line a conversion takes place that makes a net positive in energy efficiency, because the cell wouldn't have undertaken the task in the first place if that conversion weren't a net positive.

11. 05:43Claim · condensed

    Life iterates through biology to favor whichever forms can transform and store energy reserves better than others, and eventually a level of life hits energy saturation, where it can't do any more with the tools it currently has. That's what opens the door for a new, evolved system to take advantage of the newfound denser pools of energy.

12. 06:32Analogy · condensed

    Large cats became the perfect predators by selecting for the sharpest teeth and the most fast-twitch muscle fibers, the tech that let them catch prey faster than older versions of the hardware. It just happened to come from the biological arena, but it was technology all the same.

13. 06:32Claim · condensed

    That's how the hierarchy among life forms gets created: by finding a fitness advantage and leaning into it.

14. 08:02Claim · condensed

    We evolved to this state, but something happens as life makes the jump to humanity: we go from hardware updates, like bigger teeth, stronger muscles, larger bodies, to software updates, which happen significantly quicker and more efficiently, through the development of the frontal lobe. Humans were able to self-upgrade their hardware and develop ways to share those updates through language, communication, value, and energy strategies.

15. 08:02Reference

    The singular energy transformer is morphed into this hive mind or the extended order.

16. 08:02Claim · condensed

    The singular mountain man, gathering all his own resources and running on his own biological hardware, hits a limit. That limit gets overcome by pooling reserves, by specialization, by developing language and money, by the ability to transfer value and coordinate economic resources, because an economy is essentially just distributing energy to where it's most valued among people who trust each other enough that no one's going to run off with it.

17. 08:02Analogy · condensed

    Imagine the mountain man off working on his own, gathering up all the resources he needs, using only his own biological evolution and whatever tools he's been given, and there's a limit to how efficient he can be. The singular mountain man gets outcompeted by groups that come together, trust each other, and pool their energy reserves.

18. 10:08Claim · condensed

    Technology went parabolic once we had a global communication system, the internet, and a common language, effectively English, that let the extended order share information and resources at the speed of light regardless of personal geography.

19. 11:28Claim · condensed

    Up until this point the one thing that's been lacking is the ability to coordinate energy reserves and demands, because we've still been locked into a system that was built for the singular energy economy, and there are friction points in the network the legacy system can't resolve.

20. 12:05Quote

    It has hit peak fiat world. It will never be more efficient to fiat system.

21. 12:05Claim

    Bitcoin is a combination of simple systems with zero fat, purpose-built to solve a very specific problem for a very specific user, and trust in the system means friction is removed, which lets energy flow more rapidly to its most valued use case.

22. 12:05Claim · condensed

    Transactions between free agents will only happen if they lead to more reserves for both sides, or the transaction wouldn't take place in the first place. So in a free world, every transaction is a net positive for the extended order, and we want to encourage those transactions at as high a frequency as possible, with as little noise as possible, so everyone has access to the best information.

23. 13:35Claim

    If we're thinking about how money emerges in a system, a lot of people go through the collectible stage, then the store of value, medium of exchange, and unit of account stages, and we can use Gall's Law to examine that almost note for note.

24. 13:35Claim · condensed

    Step one, the collectible stage, solves the problem of inefficient coordination of energy caused by the unreliability of humans to keep their word and not break trust. You remove that from the equation by using code that can't be broken, releasing it over a decentralized network, permissionless and open source.

25. 14:33Claim · condensed

    At first it's the collectors who recognize the value early, or at least fight for it, a very special, very niche use case. The next step is making it a store of value: monetizing it, giving it a fixed supply cap, and spreading the word that it's immutable.

26. 15:04Claim · condensed

    Step three speeds the process up: making it a medium of exchange. The faster the benefits show up for adopters, the quicker adoption takes place, and you make it easier to use by developing more complex systems alongside the base architecture, so adoption comes at low risk to the foundational components.

27. 15:04Reference

    That's where things like the lightning, layer two technology, come about.

28. 15:51Claim · condensed

    Whenever we're upgrading a system, we want to hit peak saturation at that level, then branch out: test whatever we're optimizing for, make sure it actually works, and slowly migrate users to the new system while letting both run for a period of time, so there's as little pain and energy loss to the system as possible.

29. 15:51Analogy · condensed

    This mirrors how software systems get updated: you don't migrate the whole suite of actions to a completely new system at once. You parse out some elements, run them on the new version, prove they're reliable, and then scale in, so the software as a whole is never put in jeopardy.

30. 17:22Claim · condensed

    Bitcoin is a software update that lets the hive mind, the extended order, access more energy by removing inefficiencies that were necessary before its discovery.

31. 17:22Reference

    Nicholas Kardashev's scale is a method of measuring a civilization's level of technological advancement based on the amount of energy it's able to use.

32. 17:22Claim · condensed

    The Kardashev scale measures a civilization's level of technological advancement by the amount of energy it's able to use, and if you're using energy you have to have access to it, so storage is a key component, and it has to be dense and readily available.

33. 18:16Idea

    If you are using energy you must have access to it, so storage is a key component and it must be dense, or it is better, and if it's readily available.

34. 18:16Claim · condensed

    Bitcoin is the technological evolution to the limits of human potential, a new form of life that can leverage the excess energy reserves we already have and coordinate them efficiently enough to unlock further reserves.

35. 18:16Quote

    Bitcoin is the technological evolution to the limits of human potential.

36. 18:53Claim

    There's a direct link between energy consumption and GDP. In the past two or three years there's been some noise made that this is no longer the case, through efficiency gains and renewables, but let's just assume history checks out: having more energy is better than having less.

37. 18:53Claim

    Any update that allows for more efficiency wins. If there's a tool or technology that gives you access to more energy reserves than your competition, you're going to win, and the competition recognizes this, because they don't want to get left behind, which in the game of life is ending up dead.

38. 20:13Reference

    Michael Saylor recently did a beautiful job of describing the efficiency gains in Bitcoin over the current alternatives.

39. 20:45Analogy · condensed

    Michael Saylor described a genie in a bottle granting him wishes for his real estate portfolio, and walked through the list of wishes that would make property the ultimate form of property.

40. 20:45Claim · condensed

    The first wish is infinite life: being digital, it's immortal and indestructible, and there's no way it can be destroyed or removed, especially stored in the decentralized fashion Bitcoin uses.

41. 21:20Claim · condensed

    It's not prone to damage, because there are no storms, hurricanes, floods, or earthquakes that can touch something digital, so there are no maintenance fees, no upkeep expenses, and no insurance to take out on it.

42. 21:20Claim · condensed

    It's unconfiscatable and untaxable, because they can't see if you have it, and if it doesn't exist in the physical world, there's no way to keep constraints on it or levy a property tax against it.

43. 21:56Claim · condensed

    It can teleport: move at the speed of light wherever you want, which beats property that sits in one specific location someone can come and take over.

44. 21:56Claim · condensed

    It has no time constraints, because it can be broken up into infinite parts and reassembled, and converted into anything you like, unlike property that's fixed and limited in what you can do with it.

45. 21:56Claim · condensed

    There's no one telling you what you can and can't develop, and because the system is open source and permissionless, anyone can tinker, and any more efficient version that anyone comes up with benefits the system as a whole, which makes it upgrade faster than anything biological or centrally controlled.

46. 23:26Claim · condensed

    It's invisible to those who would do you harm. That's the privacy aspect: being able to selectively reveal yourself to the world.

47. 23:26Claim · condensed

    The fees to get in and out are lower, because the spreads are lower when the market is larger, so every time you enter or exit a position there's less friction.

48. 24:20Claim · condensed

    You can store it in the palm of your hand, or just in your mind, and cross borders without any possessions, just twelve words in your head, carrying your entire net worth and all your life's work to be remembered or accessed later on the other side.

49. 24:20Quote

    You can cross borders without any possessions, just twelve words in your head.

50. 24:20Claim · condensed

    If you give me all of those things, infinite life, no maintenance fees, teleportation, no time constraints, convertibility into anything, upgradability, invisibility, low fees, then don't give everyone else access to all of it too: make it a fixed supply, so it stays in a limited quantity. Every one of these is an enormous update to the current system, and the savings compound across every economic calculation and allocation in the world going forward.

51. 25:50Claim · condensed

    As these efficiencies are realized, their outputs compound: the reserves they unlock will need to be utilized, which is what gives way to new life, and life itself will become more complex because of it, whether that's some combination of the hive mind or something entirely new.

52. 25:50Quote

    Bitcoin is a claim to the total accessible supply of energy inside the extended order economy.

53. 25:50Open question

    Will life have less energy reserves in the future? It never has in the past, at least from the history that we can see. If it does have less energy, will the extended order even be here to witness that collapse?

54. 25:50Reference

    The Lindy effect of life says that there has never been a more sure bet in the history of our species.

55. 27:20Claim · condensed

    The energy incentive model Bitcoin unlocks means energy can now be transformed without taking geographic positioning into account.

56. 27:20Open question

    We haven't even touched on the miracle that is the energy incentive model that Bitcoin unlocks, the idea that energy can now be transformed without taking into account geographic positioning. Maybe I'll do a whole series of episodes on this concept in the future.

57. 27:53Open question

    How could the legacy system outcompete Bitcoin? Is there a path forward for the legacy system that actually outcompetes in terms of energy reserves? What does it do better that ultimately results in more accurate and precise coordination of energy reserves?

58. 27:53Quote

    At this point it feels like the future is here, but it just is not evenly distributed.

59. 27:53Claim

    It feels like Bitcoiners are the first adoptees on the new branch of life split off by Gall's Law's complex systems evolution. Once the early adopters test it and increase capacity for throughput, the rest of the extended order can simply migrate over to the better alternative, just like any successful software update.

60. 28:32Claim

    We're testing it, making sure there's enough capacity to allow for the least amount of efficiency loss as migration happens, and life can keep doing what it's been doing since the beginning of the universe.

61. 28:32Quote

    Life can keep doing what it has been doing since the beginning of the universe.